The doctor of doom is in

Economist Faber sees Asia boom -- the world is listening

By

ThomCalandra

ZURICH (CBS.MW) -- Marc Faber is the global economist and fund manager with a doctorate in connections.

The other day at Zurich's Hotel Baur au Lac, the Swiss-born Faber was introducing mining tycoon Robert M. Friedland to a group of the world's richest -- and most secretive -- commodities investors. Into the investor lunch walked a man, I'll leave him unnamed, who turned heads even among this group of stinking-rich money handlers.

"I would rather we not advertise this fact," Faber told me afterwards in his heavy Swiss German accent. "In this country, privacy is everything."

These days, Dr. Doom, as Faber is known in investing circles, has very little to do with the cozy world of lakeside chalets and European money flows. He spends most of his time living in northern Thailand and working out of Hong Kong.

But his network of mega-bucks investors snakes its way from Abu Dhabi, where his telephone calls are taken by top managers of the $900 billion Abu Dhabi Investment Authority, to China and into the living rooms of the oldest Asian aristocracies.

Faber is chronicling booming Asia and what he calls the region's "age of discovery." Oh, and he's having a ball.

He's a private collector of Mao Zedong artifacts and memorabilia, including hundreds of thousands of Mao badges. Faber started his collection in the 70s, when souvenirs of the Chinese leader sold for pennies.

Faber also likes to eat well and drink well. "You must have a fondue here in Switzerland, but please, not for dinner. It is just too much before the bed, yeah?"

The author of several books, most recently the eye-opening "Tomorrow's Gold," is on a mission. Faber intends to show institutional and individual investors how they can identify the next wave in global business cycles.

"Most of the money in this room," he says to a group of 45 bankers who as a group manage something north of $500 billion, "will not be interested in neglected asset classes until they become not neglected. By then, they will be very expensive."

Faber knows his assets. He also knows when he's getting the cold shoulder. "He iz not LIS-nink," commands Faber, gesturing in his Swiss German accent to a talkative and dense American jabber-mouth. "Duh-row heem OUT!" (Translation: "He is not listening. Throw him out!")

Faber says most of the world isn't paying attention to a looming boom in hard goods, fueled by a manic China that's famished for copper, platinum, nickel, timber and gold. (On Monday, the price of copper, the one metal most sensitive to global manufacturing demand, hit 87.5 cents, its highest level since December 2000.)

"At the end of the 19th century, when because of canals and trains American grain reached the world's markets, commodity prices collapsed by more than 50 percent -- between 1864 and 1900. The opening of China is having the same effect on manufactured goods," he says.

Faber, now commanding full attention, even over the famed Hotel Baur au Lac's baby salmon with béarnaise sauce, continues, "The United States is an $11 trillion economy. China is about $1 trillion. But the steel industry in China is bigger than the U.S. and Japan combined. And they still have to import stainless steel and nickel," this lumbering man says, his voice rising steadily in volume and pace.

"China is becoming the leader," says the pony-tailed money manager, who sits on the advisory board of Mongolia-to-China copper and gold company Ivanhoe Mines (IVN). "China's consumption of copper was 6 percent of the world in 1990. By 2010 it will be 29 percent or more. We are seeing milestones in physical markets." (See:China to extend reach into copper, gold.)

Indeed, on Monday, the price of platinum, a necessary component of catalytic converters in high-heat diesel engines, was at $732 an ounce, above its recent 23-year high. The price of nickel, which is used to produce stainless steel, has risen about 50 percent thus far this year.

The beauty of the Asia-fueled commodities boom, Faber is saying here between the lines, is this: MOST OF THE WORLD'S MONEY IS STILL BLISSFULLY IN THE DARK. (See the commodities chart for yourself.)

In a crisis, the Chinese like to say, there is always tremendous opportunity. That's what Faber is delivering to his audience today.

My favorite lines from Faber's latest book -- and all you really need to know if you want the crib-sheet on this economist's stalwart belief in Asia -- come on page two, when the author says, "There is a new Asia to discover. If I were 26 again, I would likely move to Shanghai, Ho Chi Minh, Yangon or Ulan Bator. I would learn the local language to perfection, live with seven concubines and start a business."

I asked Faber, over some Swiss ale and cashews, just how he evolved from a University of Zurich-trained economist to Dr. Doom. (His daily report is called GloomBoomDoom.)

"In 1987, by luck more than anything, I wrote a report the market would crash, and it did," he told me. "In 1989, I said I would cut off my ponytail if the Nikkei in Japan didn't crash. So I got the nickname."

Thom Calandra: Plus, you still have the ponytail. Marc, I see your thoughts in that financial roundtable every January. It's good publicity. Are you actively accepting new money for management?

Marc Faber: I manage about $150 million and I have not taken any new money since 1999. The way I look at things right now, if you have different asset classes, real estate, commodities, equities, and if one appreciates more than the others over a long period of time, all the money in the world will flow into that asset class. Eventually it will end in a bubble. Once it bursts, there is always a change in leaders. The Kodaks, the Intels, they must give up their leadership.

Thom: Give me an Asia theme or two so I can go sock some money into the age of discovery.

Marc: Well, let's take brands. Who knew Shiseido from Japan 20 years ago? Who knew Samsung (South Korea)? Now it's Tsing Tao(168)beer from China. BudweiserBUD, +1.39%owns 20 percent of them. Or Legend Computer(992). There are 36 cellular phone manufacturers in China, and 50 percent of their market is in China. Just three years ago, the local phone makers had just 3 percent of their own market. So this is a China consumer story. The Swiss drink 50 percent more coffee than the Chinese, per capita. But because the population of China is 200 times greater than Switzerland's, their coffee demand is many multiples higher. It's the same with many physical goods, cotton, industrial commodities. I tell people, 'Don't get the big picture wrong; otherwise, you are going to take a big vacation -- from profits -- the next 10 years.'

Thom: Marc, your book, 'Tomorrow's Gold,' is required reading for anyone who wants to make serious money in the next 10 years. I have my whole family reading it. It's not just China you get into.

Marc: Right. One sector that will probably do very well is Thai health care, for instance. The Thais can do medical services at 5 percent to 10 percent of the U.S. cost. There are listed hospital management companies in Bangkok You can probably get better care and services, and the finest hospital room you'll ever stay in, over there.

Thom: Thanks Marc. Next time I need a hospital room, I intend to check in.

The Calandra Report

Later this week, subscription service The Calandra Report will chronicle the money flow from electronic bedouins in the Arabian desert to lakeside commodities managers in Europe. I'll have the latest on why one pioneering energy company, on a five-year road-trip to becoming a $3 billion-plus entity, is about to bridge the money trail between the Middle East and Asia. (Repeat after me: "This is a $20 stock. This is a $20 stock.") Also, we'll have updates on price surges for a video-technologies company and an electronic software distributor/manager, both on The Calandra Report Recommended List. And of course, the latest on The Calandra Report's hit list of natural resources companies - nearly all of them having generated substantial wealth for subscribers in the past 10 weeks. See:The Calandra Report.

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